Mining News - Published on Fri, 25 May 2018

Cobalt 27 Capital Corp announced that its wholly-owned subsidiary Electric Metals Streaming Corp has entered into a Metal Purchase and Sale Agreement with Ramu Nickel Limited, a wholly owned subsidiary of Highlands, for a cobalt-nickel stream on its attributable interest in the producing Ramu mine, located in Papua New Guinea which is operated by MCC.

Key Transaction Terms
1. The Ramu Cobalt Nickel Stream is governed by the MPA, pursuant to which Cobalt 27 has agreed to acquire the right to purchase 55.0% of RNL's attributable share of the payable cobalt metal and 27.5% of RNL's attributable share of the payable nickel metal produced at Ramu, for the life of mine, in exchange for a USD 113 million (CAD 145 million) upfront cash deposit payable to Highlands. Highlands, which owns 100% of RNL, currently holds an effective 8.56% ownership interest in Ramu. However, Highlands will use proceeds from the Transaction to increase its effective ownership interest in Ramu to 11.3% through the repayment of its share of outstanding Ramu construction and development loans. For clarity, the Ramu Cobalt Nickel Stream will be over RNL's pro forma 11.3% ownership interest in Ramu.

2. In addition, Electric Metals Streaming will make ongoing payments of USD 4.00 per pound of payable cobalt and USD 1.00 per pound of payable nickel, each subject to annual inflation adjustments beginning on June 30, 2023.

Cobalt 27's Ramu Cobalt Nickel Stream will be secured by a first-priority ranking pledge over Highlands' shares in RNL and a guarantee by Highlands.

3. In connection with the Ramu Cobalt Nickel Stream, Cobalt 27 has also agreed to complete a strategic equity investment in the Common Shares of Highlands, which will result in the Company owning an approximate 13.0% pro forma interest in Highlands. Subject to ASX and POMsoX approvals, Cobalt 27 will be provided with anti-dilution rights with respect to the Equity Investment. In connection with the Equity Investment, Cobalt 27 will also have the right to appoint a member to Highlands' board of directors, and accordingly, concurrent with the close of the Equity Investment, Anthony Milewski, Chairman and CEO of Cobalt 27, will be appointed to the board of directors of Highlands.

4. Cobalt 27 and Highlands have agreed that the proceeds from the USD 113 million stream are to be used by Highlands to fund repayment of Highlands' attributable Ramu partner loans. Highlands currently owns an 8.56% interest in Ramu which, through the repayment of its outstanding attributable balance of the Ramu partner loans, will immediately increase to 11.3%.

5. In addition to the MPA, Cobalt 27 has entered into advanced discussions with two local PNG stakeholders which own an equity interest in Ramu to negotiate a USD 87 million stream agreement on the same terms as the MPA with a proportionate metal stream based on their attributable aggregate interest in Ramu. MRDC currently holds a collective 6.44% interest in Ramu, which would increase to 8.7% through the repayment of their proportionate share of outstanding Ramu construction and development loans.

6. Highlands has retained the right to purchase an interest in the Ramu Cobalt Nickel Stream from Cobalt 27 of up to approximately USD 15 million for a period of 90 days following closing on the same terms as the Transaction. In the event that MRDC enters into a streaming agreement with Cobalt 27, Highlands will have the right to purchase an additional interest in the Ramu Cobalt Nickel Stream from Cobalt 27 of up to approximately USD 10 million on the same terms.

7. Highlands is the ideal project partner for Cobalt 27 due to its deep experience in the region having successfully operated in PNG for over 20 years. Cobalt 27 looks forward to partnering with Highlands to review additional opportunities in Australia and the broader Asia-Pacific region.

8. In order to further strengthen the partnership between Cobalt 27 and Highlands, Mr Craig Lennon, CEO of Highlands Pacific, has agreed to join Cobalt 27's Advisory Board. Mr Lennon has been with Highlands for 17 years and is an expert in the region.

Mr Anthony Milewski chairman of Cobalt 27 Capital Corp commented that "This transaction represents the fulfillment of our promise to investors to deliver a cash flowing cobalt stream on a world-class mine. Ramu is a large world-class, high-margin and long-life asset which we view as the ideal candidate for our inaugural stream. We believe the exposure to both cobalt and nickel, another key battery metal, will yield significant returns to our investors as electric vehicles begin to change our society in the coming years. Our partnership with Highlands will help Cobalt 27 continue to grow its position as the leader in battery metal streaming."

Ramu, located near Madang on the north coast of PNG, is majority-owned and operated by MCC which holds a 67.02% stake in MCC-JJJ Mining Development Company Limited which owns 100% of MCC Ramu NiCo Ltd, holder of an 85% joint venture interest in Ramu. The Government of PNG and local landowners own a 6.44% stake in Ramu. Following repayment of the Ramu construction and development loans by Highlands, MCC - Ramu's ownership will decrease to 82.3%. The Ramu mine was financed and constructed by MCC for USD 2.1 billion which, at the time, was China's largest overseas mining investment. MCC is listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange with a market capitalization of approximately USD 12 billion. MCC's interest in Ramu is supported by a consortium of three of the largest enterprises in the Chinese nickel and stainless steel industry, namely Jinchuan Group Limited, Jilin Jien Nickel Industry Limited, and Jiuquan Iron & Steel Limited.